Appendix V Letter from the Market Consultant in Relation to Its Hong Kong Hotel Industry Report

APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT Regal Hongkong Hotel Regal Hongkong Hotel (“RHK”) is located in one of Hong Kong’s most popular tourism and retail destinations and benefits from extensive transport links with the rest of the territory. Nearby HKCEC is Hong Kong’s landmark conference and exhibition center and attracts large number of international visitors to its trade fairs each year. The 40,000-seat Hong Kong Stadium and Victoria Park are also within a 10 minute walk of RHK. Location RHK is located in Causeway Bay, one of the busiest commercial, shopping and entertainment districts in Hong Kong. The Property RHK, a 33-story building (plus four basement floors) opened in 1993, has a total gross floor area of approximately 215,736 sq.ft. RHK comprises 424 guest rooms, 3 restaurants, 1 bar, 1 lounge, 1 cake shop, 1 ballroom of approximately 2,300 sq.ft. and 10 meeting rooms. It also provides a range of recreational facilities including a swimming pool and a health club. RHK is classified as a High Tariff A Hotel by the HKTB. RHK has only a few harbor view rooms, limiting its ability to charge high rates. Nevertheless, RHK is well-known for its high standard of decoration and its spacious guestrooms. RHK is a medium size hotel, hindering its ability to accommodate large convention/conference groups. Nevertheless, the range of facilities provided by RHK is ample compared with similar hotels in the district. Outdoor swimming pools, for example, are not available at The Park Lane Hong Kong or the Excelsior Hotel Hong Kong also located in Causeway Bay. Asset Enhancement Works The enhancement works, after completion in Q3/2007, will provide 50 new super-deluxe guest rooms on top of the existing hotel. 2 additional stories will be added to the building and RHK’s total gross floor area will increase to approximately 269,911 sq.ft. Renovation work carried out recently at the RHK has included renovation of the coffee shop and Chinese restaurant. To avoid excessive noise generated during construction, main structural elements like columns and beams will be made of steel. Concrete floor slabs will be prefabricated off-site. Noisy works such as in-situ concreting, formwork fabrication and steel bending are therefore avoided. The western restaurant on 31/F will be vacated during the construction period, together with the mechanical floor on 30/F; and this will act as a noise buffer to the guestrooms below. The noisy interior carpentry works will be kept to a minimum by off-site prefabrication. Construction materials delivery will be by tower crane erected on the rooftop. The vertical movement of workers will be restricted to fire exit staircases so as to avoid any disturbance to the hotel’s normal operations. The higher room rates expected from these new deluxe rooms will lead to higher overall average room rates for RHK. — 501 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT Transportation and Vicinity Located in Causeway Bay, RHK is well served by various modes of transport, including MTR, buses, mini buses and trams. The MTR Causeway Bay Station is just 3 minutes walk from RHK. All major business districts in Hong Kong, including Central, Wanchai, Quarry Bay and Tsim Sha Tsui, are within 10 minutes by MTR and the Airport is around 38 minutes61 travel time, also by MTR. Causeway Bay is also connected to other areas of Hong Kong by its extensive road network. The area is linked to Kowloon via the Cross-Harbour Tunnel and to the western part of Hong Kong Island via Gloucester Road and the eastern region via the Eastern Corridor. Two major infrastructure projects are expected to improve the overall accessibility of the Causeway Bay area, namely, the Shatin to Central Link and the Central — Wanchai Bypass. Nevertheless, these projects are long term and will not be completed before 2010. RHK is close to a variety of developments and facilities, including shopping/entertainment developments such as Times Square, Lee Garden, Lee Theatre and SOGO Department Store, business facilities such as Hong Kong Convention and Exhibition Centre (“HKCEC”), and recreational facilities such as Victoria Park, the Hong Kong Stadium and the Happy Valley Race Course. HKCEC is regarded as one of the most efficient and functional meeting and exhibition centers in the region comprising around 700,000 sq.ft. of exhibition and meeting space. Each year, HKCEC hosts more than 45 international trade fairs including the world’s largest leather fair and watch and clock fair. The regular international fairs for giftware, toys, fashion, jewelry, electronics and optical products are Asia’s largest. The exhibitions and fairs generate strong demand for hotels in the Wanchai/Causeway Bay area. In view of the growing M.I.C.E. market, the Trade Development Council proposes to extend HKCEC by adding approximately 200,000 sq.ft. of additional convention and exhibition space. With a scheduled completion in 2009, the larger center is expected to draw more business travelers to Hong Kong. The 40,000-seat Hong Kong Stadium is the largest outdoor multi-purpose entertainment and sports venue in Hong Kong. Located within a 10-minute walk of RHK, the Stadium hosts a number of high profile international events such as the Rugby Sevens and the Lunar New Year soccer tournament. Victoria Park is within a 5-minute walk of RHK and has a site area of over 17 hectares. The Park has been chosen as the venue for a number of international tennis tournaments including the Champions Challenge and the Davis Cup. The easy accessibility of RHK and its proximity to major retail, exhibition and recreational facilities in Hong Kong helps diversify RHK’s guest profile to capture leisure travelers, businessmen, trade show/exhibition participants and organizers and sports groups. 61 Source: MTRC — 502 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT The Pedestrian Plan for Causeway Bay includes the 24-hour pedestrianization of Kai Chiu Road, the construction of an underground pedestrian-cum-retail link across Hennessy Road, and the provision of public transport interchanges. Although detailed development schedules have not yet been drawn up, once completed, these schemes should enhance the overall accessibility of Causeway Bay and further strengthen its role as a major retail/entertainment center in Hong Kong. Complementing facilities are also in the pipeline within the neighborhood. Hysan Development Limited’s plans to redevelop its Hennessy Centre into an office and retail complex, which will comprise approximately 700,000 sq.ft. of commercial space with a heavy retail element, to be completed in late 2009 or early 2010. Competition According to the HKTB, there were twenty hotels located in the Wanchai/Causeway Bay area, comprising approximately 8,400 rooms, or 18% of the territory total in 2005. Hotel Stock Distribution by Year of Completion in Wanchai/Causeway Bay, 1970-2006 2000-2006 24% 1970-1979 22% 1990-1999 27% 1980-1989 27% Source: HKTB, Savills Research & Consultancy Hotel completions have occurred consistently throughout the past three decades with 20% to 30% of stock completed in each decade (70s, 80s and 90s). Significant hotel supply during the period includes The Excelsior (883 rooms, 1972), The Park Lane (803 rooms, 1973), Grand Hyatt (556 rooms, 1988), Renaissance Harbour View Hotel (860 rooms, 1988), Novotel Century Hong Kong (511 rooms, 1991) and Regal Hongkong Hotel (424 rooms, 1993). Over the past 7 years with 9 hotels have been completed (1,997 rooms in total), five of them (1,334 rooms) were completed in 2005 alone. There are two scheduled hotel developments in Wanchai/Causeway Bay, the 366 Lockhart Road hotel project and the 6-20 Leighton Road hotel project, for completion in 2007 and 2008 respectively. This may provide competition to RHK although their operators and grades are yet to be made public. — 503 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT Besides new hotel development, only two projects where the use of existing properties will be changed to hotels in the Wanchai/Causeway Bay area are scheduled over the next five years. Proposed Hotel Developments in Wanchai/Causeway Bay Development No. of Rooms Expected Completion Rison Hotel (Change of existing property) 82 2007 366 Lockhart Road (New hotel) 36 2007 17-21 Fenwick Street and 52-58 Jaffe Road (Change of existing property) 96 2008 6 — 20 Leighton Road (New hotel) 206 2008 Total 420 Source: HKTB, Savills Research & Consultancy Performance Average Occupancy Rates of RHK, High Tariff A Hotels and Wanchai/ Causeway Bay Hotels, 2001-2005 Regal Hongkong Hotel High Tariff A Wanchai/Causeway Bay % 100 90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 Source: Regal Hotels International Ltd., HKTB, Savills Research & Consultancy — 504 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT RHK has performed well compared with the High Tariff A market and the Wanchai/Causeway Bay hotel market in general over the past 2 years with its occupancy rate surpassing 90% in 2004. A slight decline in both RHK and the district occupancy was recorded over 2005, following the overall market trend. Average Room Rates of RHK and High Tariff A Hotels, 1997-2005 Regal Hongkong Hotel High Tariff A HK$ 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Regal Hotels International Ltd., Mandarin Oriental Hotel Group, HKTB, Savills Research & Consultancy RHK recorded 16% growth in average room rates in 2004, similar to High Tariff A market growth.

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